Home > Auto Loans >Bad Credit Auto Loans > New Bad Credit Auto Loan Vs. Used Bad Credit Auto Loan
New Bad Credit Auto Loan Vs. Used Bad Credit Auto Loan |
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If you have bad credit and want to buy a
vehicle, there are several factors that you will have to consider before you make your decision whether you will go in for a new or used bad credit auto loan. There are advantages and disadvantages in both the cases and you must judge the options and then make a decision. The primary deciding factor is naturally the cost in each case and how much you can afford. Many dealers offer 0% new bad credit auto loan interest rates which is too tempting to refuse. The catch in this offer is that this new bad credit auto loan is normally for a maximum of 36 months, which increases the amount of monthly payments. If you can cope with this high payment every month, this is the ideal option and you must go in for this new bad credit auto loan as against a used auto loan. Moreover, the interest rate for a new bad credit auto loan is normally less than the interest rate for a used bad credit auto loan. Although the difference might be just one to two%, it can still influence your decision. Even in the case of used cars, the older the car, the higher the interest rate. Your decision to choose between a used or new bad credit auto loan should be affected by the interest rate and whether you qualify for a special interest rate offered by a dealer or a lender. The spread between the rates for used or new bad credit auto loan is also an important factor that should influence your decision. Loan terms In the case of new bad credit auto loan, many dealers give the option of financing up to 72 months with which you can adjust the payment schedule depending upon the amount of monthly payment, which suits you best. However in the case of used bad credit auto loan, the dealers do not allow finance for more than five years. Most people base their decision to get a used or new bad credit auto loan depending upon what monthly payments they can afford. As the monthly payment depends upon the term of the loan, you might find that the monthly payment in the case of a new car with a loan term of 60 or 72 months might be almost the same as the monthly payment for a used car with a loan term of 36 or 48 months. You can then decide whether you would like to drive a new car or an old car, the only difference being the length of the loan term. You might decide to go in for a new car but as mentioned above you would be paying a large amount of interest over a longer loan term and thus expose yourself to becoming upside down in your bad credit auto loan. Being upside down is when the value of the car is less than what the amount owed on your loan is and this happens because a car's value depreciates up to 20% when it leaves the dealer's lot and due to the longer length of the loan term, the value keeps on depreciating further every year. You should, therefore, finance the vehicle for the shortest amount of time possible to avoid an upside bad credit auto loan. This means that you would be better off driving an old car. Another important factor in making a decision is the insurance coverage for your vehicle. The lender will always insist that your vehicle is insured and the insurance premium depends upon where you live, the type of vehicle and your driving record. Moreover, since the value of a new car is higher, the insurance will also be more expensive than on a used car. You should check out the insurance charges and add it to your estimated cost of the vehicle to compare and make your decision regarding new or old bad credit auto loan. You can now decide, keeping in view all the above factors. |
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